The Missouri Department of Revenue recently issued a letter ruling discussing the taxability of research and development (R&D) equipment in the state. Mo. Ltr. Rul. No. LR 7079 (Dept. of Revenue Apr. 13, 2012). The Applicant works in the dairy industry and wanted to purchase a large pasteurization device to test the effects of very high heat pasteurization on its own products in terms of flavor and color. The Applicant wanted to know whether this type of equipment would be exempt from state and local sales tax as R&D equipment.
R&D equipment is generally exempt from state sales tax. However, only R&D equipment purchased for use or consumption directly or exclusively in the R&D of agricultural, biotechnology, plant genomics products, and prescription pharmaceuticals consumed by humans and animals are also exempt from local sales tax. R&D equipment purchased and used in R&D related to manufacturing, processing, compounding, mining or producing any product will be exempt from states sales tax, but not local sales tax.
The Applicant plans on using the large pasteurization device to test the effect of very high heat pasteurization on its own products in terms of flavor and color. This use amounts to a research or experimentation activity related to manufacturing. Therefore, this type of R&D equipment will be exempt from state sales tax, but not local sales tax.